>> hitting the brakes. gm, audi and jaguar are suspending car sales in russia. >> hollande the possibility of rolling back sages in russia. russia.nction in >> good morning. you are watching "the pulse." air france has cut its 2014

target. let's bring in kerry. why has it been -- this is the third profit warning? >> things just aren't getting better. if you add up all the downgrades, it's almost 1 billion euros. so not looking good. they raised 4 points yesterday two of which we know which is the strike, they also said that they're seeing some softness on long haul which is the reason they did the first downgrade. they also said there's a pension cost that they're not going to get. then fuel. fuel is dropping but we haven't seen a benefit from it yet. so that is also not coming through for them. >> management telling us why 2015 is going to be a better year? >> they're being a bit cautious. when it comes to -- they're going to be pushing back some plane deliveries. so 777s. their 2016 deliveries. it's interesting to connect that up with the fuel issues. so fuel, the prices dropping,

you are less in need of these efficient planes. so they're taking a bit of an opportunity. it's interesting to see people discussing fuel and what that's going to mean for the consolidation of the european airline sector and saying to some extent you might see airlines taking advantage or ones that are struggling to some extent taking a bit of a breather and maybe pushing back deliveries or doing things like that. >> we also had another airline stories which is the bid to buy iag. >> the board apparently got the offer on the 14th. they looked at it for a couple days and rejected it by the 16th. so they didn't think this was good enough. there are a few different things going on. specifically the ceo has resigned. they have not appointed a new ceo. they also have a pension issue that has been ongoing. they're close to resolving that.

and then ryan air, which is a 30% shareholder, has been underpressure from regulators to sell down their stake. so all of those three things coming together, you have to wonder if he says maybe this is a good time. >> why does he want it though? i've heard it has a large number of slots. he can also bolt it back in to the one world alliance. he used to be a bilet for this business. why does he want it? >> it's interesting to hear what he says about those heath row slots. he always said the value is in the dublin london connection. so you have to wonder what he is going to do with those. it's one of the most luke rative business routes in the world. but they've been very good about developing transatlantic. so maybe he thinks -- and they've done a lot of work on their balance sheet. the pension issue is close to getting resolved. so those things might be --

he's a man he also, you know the ambitions of iag are they're big. he's taken on iberia. i think he's probably looking for other opportunities. >> what are the chances of them going back to the higher bid? >> well, everybody in the market seemed to like it. you saw all the shares rise for all three airlines yesterday. there's definitely a sense that if the price were right i have to think that if you can get the government on board and ryan air on board then you have over 50% of the shares. and then it should be quite an easy sell. >> any regular tri issues? >> the government will have some issues. they will want to protect the dublin-london connection. i'm sure there are discussions they want to have to make sure competition is maintained. but it's going to be interesting to see how he handles that. i think it's definitely something that he wants to do.

so when he wants something he goes for it. >> thank you so much. >> now, from planes to cars and a time out from russia. ome of the world's largest companies are responding. so if i'm sitting in moscow and i want to buy a new car this morning, who can i not go and buy one of those cars from? >> jag war, land rover, which i know you would never be caught in one of those guys. general motors as well. can't buy sfrom them. audi you could by from audi but you would have no certainty on what the price is. audi's response is most interesting. they're suspending their pricing until they figure out what an actual audi is worth in rubles. what you see is all the auto companies really wanting to deep one foot in russia while

trying to figure out this ruble which has collapsed, of course. russia is the second biggest market in europe. 2.2 million annual sales. but look at the numbers to see just how far down they are. take b.m.w. 33,000 cars down 70%. let's look at monthly figures. 23%. agen down 14%, bmw now, bmw is one of the few companies that actually denominates their offshore ruble holdings. there's one estimate that if the ruble collapses by 50% in the fourth quarter bmw would 150 million euros. so what used to be some big luxury takers in russia. >> is anyone actually taking advantage of this? we talked last week about por

sha's sales. >> there's something funny bout portia and lexus. por she is up+++ sees is up slightly. what we may have seen last month is very wealthy russians parking their assets in these luxury vehicles. unfortunately for all the other auto brands with that rare exception the luxury space it just isn't holding out. so that's why we've seen these declines and really these radical moves.

>> irish airliner has turned down anapproach from iag. a takeover would have consulled dated their dominance. which is europe's busiest hub. they said there was no certainty that a further offer would be made. >> weighing a proportional response to the cyber attacks. sony canceled the release of the movie due to threats from hackers. white house spokesman refused to say whether the u.s. has concluded that north korea was behind the attacks. he says the administration is wary that the intrusion may have been designed to provoke a arge-scale reaction. consulting on its view that limited review of the football contents may harm competition between pay tv retailers. they will review whether regulation will require sky to offer two sports channels remains an appropriate way to ensure competition.

will outline further steps to be taken in 2015. >> coming up, a rift on russian sanctions as the ruble leaves the russian economy in free fall french presidents breaks ranks with his european peers over the timeline to end those sanctions. >> and as greek prime minister puts his record to the vote former economy minister weighs n on what greece needs next.

>> welcome back. you're watching the "the pulse" we're on your tab lets and the phone. continuing to watch russia. however there's been a wrimpingle. the french president has hinted at the possibility of rolling back sanctions. this as the german chancellor ays that's much too early. ryan, walk us through what they said and any analysis of why he said it. >> it's a bit off script here and he's ahead of schedule. effectively what he said is we need to start discussing rolling back the sanctions. the problem is that the european union had already agreed to wait until march to even begin those discussions. so he's a good three months

early. you can kind of understand obviously because just this week russian sailors left france without their war ships that russia was prepared to pay $1.5 billion. understandable but nonetheless, this is a bit of a surprise. austria as well has been complaining. austrian banks have been really hit hard by this crisis. one of their banks was down yesterday almost 7%. and so have the germans. basf shelving their deal to swap assets. that's the second deal they lost out on. they were also going to have a stake on south stream, another victim of the political climate. but nonetheless, the german chancellor saying that despite that pain, we have to continue with the sanctions until we see concrete action from the russians. but it seems like the preven

president says it seems like the russians are playing nice. >> talk to us about this e.u. summit. they were going to discuss russian's turmoil. >> you know, one of the interesting things is that when these sanctions began back in march the price of oil was around $110 a barrel. and we heard yesterday from the foreign minister of denmark saying we have to be careful with these sanctions. the goal of the sanctions was not to explode or collapse the russian economy. the goal was to punish russian decision makers to get president putin to change his ways in ukraine. there is real concern right now that they may be pushing the russian economy over the edge. not the sanctions alone but sort of colluding with the fall in the oil price. and that is one reason why there is no talk other than the sanctions that they introduced of course yesterday against crimea but those are quite

specific and quite i would say minor. of actually going forward with any new sanctions. >> so france says we should roll them back. the americans say no. we're going to do more. >> sort of. so the congress voted for this bill almost unanimously bipartisan both houses. it's called the ukrainian freedom support act. i can tell you i actually ended up as an exchange student going to russia on the russian freedom support act back in 1990. so interesting that they have just changed it to the ukrainian freedom support act. in any case this is anything but an exchange program. it envisions weapon sales to the united states $350 million and new sanctions against russia. president obama signed it but was very clear this just authorizes him to impose new sanctions. he doesn't intend to do it and the russians have responded

saying just talk of selling weapons or giving weapons to the ukrainians is unhelpful for the peace talks. >> thank you so much indeed. i'm trying to picture the scene ryan on an exchange program. >> we learn everything -- new things every day. >> now, great to have you on the program. we all listen first to putin's state of the union address yesterday. he was in great form >> he was there, he played to the pop list uprising that he says he sees in the country. how worried should we be? >> well, this speech that he gave yesterday, the introduction and responses to the journalists were framed in a way that was made to reassure the russian population on the government's control of the situation. he did recognize that there was a difficult situation. he refused to call it a crisis.

he was trying to project an image of a government doing anything possible but perhaps not getting the timing right and but that's what was his main message. exactly calming the panic that started to ensue? russia earlier in the week. >> effective? >> well, when we were watching the market ets i had ditnom seem to be so. but there don't seem to be that many signs of impending bankrupt in russia there was a little panic buying earlier in the week. let's see how it goes over the next couple of days over the weekend and into the christmas whether the president managed to reassure the population. >> how do we get out of the situation elegantly? is sanctions the lift the only way? >> well, the sanctions tend to be a little more sticky than anybody would imagine at the beginning. russia was actually need to do a lot to have the sanctions

rolled back in the eu would need a consensus of 28 countries not only france agreeing to such a solution. it is most likely that the moment when the sanctions could be lifted would come the end of july next year when the sunset clause of the sanctions kicks in. and then you would need a consensus of 28 eu countries to extend them. so that would be the most likely point. but we would need to see a sustained period of peace in eastern ukraine and some sort of constructive steps taken by russia in the next couple of months to make this possible. >> what is france waw thinking when he says what he is think sng >> i think it is a good call bad call really because we have seen merkel having quite forceful statements in the last couple of days. counters with softer statements but one way or the other the sanctions are not going anywhere without a

consensus of 28 countries and a lockstep with the u.s. because the last thing they want to do is break. >> but the good cop bad cop routine is done on purpose or is he -- >> for a long time, for example, the italians were close to regimes that probably they shouldn't have been very close to because there's always something to gain from that. >> well, i think it's mixture of things. france has an interest and good relations with russia. but it is also softening those statements sent out over the last couple of days. let's not forget that it was also the eu that tightened the sanctions yesterday. >> do you think it's incredibly soft in a way? >> i can answer that. >> let's give france waw some mack vellion credit here. is there an argument that says that -- putin in the press conference made it very clear that the wevs is to blame that the problems that russia is

experiencing right now. if he was to take away the sanctions you take away that excuse. is there some -- am i overthinking this or do you think that? >> i think that's a big of a stretch because on the e.u. side now there is sort of a thought that well actually the sanctions are working. >> right. >> and what do we do if russia destabilizes? so it's more of that thinking that started to kick in that what is europe going to do if it has destabilized russia within its immediate geographic cal neighborhood. >> because it always ends well. doesn't it? >> it doesn't. that's the issue. but so what -- in destabilizing russia would you be more concerned about the fact that the economy would actually have a serious ripple effect if it goes down the drain or are you also concerned about regime change? if we see in the west that putin is not that market friendly we could be even more worried about who comes next. >> yes. i think you're right on both

accounts. i would say that we are more concerned about the economic situation having protracted negative effect on the population. and perhaps destabilization coming that way. but still percentage for potential for a regime change is always that. the general rule of thumb would be stick with the devil you know because then you have to negotiate. so for now it is possible that the mood that the russian population is in, that the next potential leader would be equal hard liners because that's exactly what the population would want. >> how is it going with china in the environment? >> it is not going as well as russia would like to have it. the financing coming in is not materializing. the energy deals are sort of five years down the line. so they are trying hard to establish those relationships to develop an alternative to dependence on the west. >> if that doesn't work, this is the kind of get out of jail card that putin is relying on.

if he plays it and it doesn't work where does that leave him? >> having to use state money which is dwindling because of the oil that has been used to basically substitute all the investment in the economy. the state owns more than 50% of the economy in russia. so that would be their only sort of a source of further investment in the country. >> thanks so much for joining us today. >> coming up we're going to talk brands in crisis. the ruble freefall and the collapsing economy put a strain on the made in russia brand.

>> now, as the euro dropped to a close i've been catching up with some of the their corporate movers and shakers. i spoke about their toughest challenges and why next year is shaping up to be a good one. >> i'm always amazed by the strength of the u.s. economy. incredibly strong, productive, creative, innovative. they really produce -- you know. and really something the euro zone is just starting to understand. >> by funding the economy is really -- >> the growth is very

important. funding the economy. >> i don't want to say you're wrong but i have a question. >> go for it. you can play my role. >> no. >> you will lose. >> no, no. bloomberg would lose. no, no. the question is maybe they have been right in letting lehman going bankrupt. do you believe it was now in hindsight the good move or the wrong move? >> all right. so you can watch that show a little bit later on today at 5:00 p.m. u.k. time today. 100 a little bit of map, billion market capitals were all at that lunch in charge of 200,000 employees. >> did you pay the bill? >> it wasn't for the four of us. it wasn't for the whole 100,000

employees. >> coming up, he puts his record to the test at an early presidential election. is the greek economy at risk? we'll discuss that with the former finance economy minister of greece.

>> welcome back to "the pulse." >> these are the "bloomberg" top headlines. >> the barninge of japan has maintained its levels. the bank said it will boost the monetary base at an annual pace of 80 trillion yen. ey expect the japanese government to maintain its recovery. >> the hong kong monetary authority says there was no evidence of market manipulation found in its probe.

the authority says there was one suspected attempt to influence anation currency benchmark fixing though there was no evidence that this actually affected trades. >> a plan to swap natural gas assets has fallen through. the world's biggest chemical maker said yesterday in a statement the cancellation will cost the company 324 million euros in current and retro active expenses. now, the deal marks one of the hardest blows yet to a german country as relations continue to decline. speaking back in july they had told "bloomberg" he was certain the deal would go through. >> i'm 100% confident because everything is in place but some legal preparations we have to do internally still have to be undertaken going on. therefore, not as previously announced on july 1. >> i wouldn't be surprised at that point he was so confident

it would go through. italian banks getting smacked around a little bit this morning but generally stocks are good. >> i hate to say it but italy really setting down right now. it is lower. you can see green around the rest of europe. you've got higher markets in spain, the dak up by of% of course coming off the back of the biggest since 2011. 8/10 of 1%. it's worth it as always to put in a little bit of perspective here that it's down by 3%. it's the energy stocks taking a beating. call it a rebound, what you want. yes, we are shaping up for a strong finish. in the markets, perhaps the big corporate story, the big stock mover has been air france down by 6%. here we are right now lower doing what they started to become good at which isn't good at all. a third profit warning for europe's biggest airline.

there's is the stock mover. but here we are. dollar-ruble. here it is. a stronger ruble this morning. president francois hollande pairing up the script talking about scaling back sanctions on russia. is it possible? does it take a little bit of a risk out of the situation going into 2015? at least it's up for discussion. what i will say is we are setting the scene for a little bit of a rift inside europe about how best to tackle the situation in russia. >> thanks very much indeed. good cop-bad cop. maybe that's what the europeans are up to. maybe that's being too forward thinking. >> maybe. a beak ruble of course and the economy on the brink of turning russia into a public relations nightmare. some companies worry about being associated with a losing economy. our next, joining us from

moscow is the p.r. agency. tom black well in a "bloomberg" exclusive. great to have you on the program. how much of this is a stigma or how much of this is just companies trying to stop losing money in russia? and if you were to pick at the five most popular brands, western brands in russia, are they suffering? >> well, i think that there's a lot in that question. i think that certainly in terms of the western brands and their performance in russia, certainly a lot are suffering. you've seen the last half hour sales are down. and there is a lot of hostility towards the west, which is just fueled by the people at the top. so without a doubt the environment is not very friendly. but having said that, if you look at it from the russian company perspective, there's definitely a stigma in the international markets and this is a challenge that every single russian company faces

today. >> are these guys in survival mode right now? p.r. is important in making sure that their image is a good one. certainly something they want to work on but a lot of firms are looking at the bottom line, how much cash they've got on their books and trying to figure out what's next. how important is the image right now? >> i think you need to separate out russian companies into different categories. there are a lot of companies particularly those, for example, that have debt in dollars and have a ruble based revenue. for them, the challenges they face go way beyond any kind of image or stigma for them it's in and day out trying to keep cash, not go under and continue to be operating in a year's time. you have other companies that aren't quite in the same type of buy-in, particularly those that have dollar revenue. for them, they've got a bit more flexibility to play around with, particularly if they're not overly leveraged. so they're thinking about how

they can actually adapt in the current environment. >> so give us a sense of who you represent. what kind of questions you get from clients and the advice you give them. >> well, one of the big issues that, as you'll know, one of the big thing that is a lot of those larger russian companies have been thinking about is asia. so so far it's really yet to be proven that asia can be a viable source of alternative finance. but it's certainly a lot of the larger companies are having a good go at that. because asia is quite new unchartered territory for the big banks, big resource companies, raising that question for the first time, how do they build up a dialogue with theation markets and how do they sell themselves to invest they haven't previously considered russia very much. so that's a big topic on people's minds that they're looking at. >> how big a shift is that compared with working with the europeans? is it a complete change in the way that these companies look to position themselves? >> a big change in terms of how

russian companies are positioning themselves in asia? >> i've previously been focusing on western markets and i want to make sure that my image there is one that is aligned with those western markets. my completely having to rip up that model and completely change the way that i operate if i want to pivot over toward the asian story? >> absolutely. russian companies are complete nolvet for the vast majority of asian investors and asian businesses. whereas in europe, investors and the business world is pretty familiar with the russian story and has become very familiar with it over the last 15 years. for asia it's starting from zratch. it's who is who, what you need to do, who you need to talk to. it's really sort of stage one. how much success they will have, the jury is still out on that. >> the russian economy is in

many ways a state-driven economy. how many -- do the russian companies that you represent ay -- take their cues from the kremlin? has it been amplification from the message that has been delivered from president putin? >> look, i think that russian companies by and large in this covers both the state companies as well as the larger private companies they are pretty cautious in what they say. maybe the real state influenced companies might take cuse or make statements designed for a local audience than international audience. but everyone across the board is pretty cautious about saying something that might get them into too much trouble at hofmente but that does create a big complication. no russian company wants to burn its bridges with the west. they're trying to keep a normalized dialogue. but having to look at that with a domestic political lens so that they can manage both relationships on both sides of

the fence. >> can you give us a sense of the industries when we talk about russian brands, the obvious thing that comes to mind of course is vodka brand. are they going to be hurt if you have a breakdown of the industries where russian brands are quite iconic, which ones are going to struggle the most? >> in terms of russian brands outside of raugs do you mean? >> in terms of russian brands because of the stigma that we've been talking about. >> look, i mean, i think maybe this one of the benefits to russia of having failed largely over the years to really launch suck sessful brands outside of russia. you can cound them on one hand and have a couple fingers left. there's not a lot of stake to russian brands outside but does this create a set back in terms of russia being able to progress in that? absolutely. i think eist going to be -- we've got a couple of years here before we're back in a situation where what's european

consumers are going to look at russia with either neutral or favorable eyes. it seems to me that's definitely the case. >> thank you so much. >> now coming up in the next hour cue the violins. a good eye and a good ear can help pad your bottom line. an expert is going to join us with advice on what to look out for when investing with rare and fine-tuned instruments. an asset class that has performed and we're going to find out why.

>> back to "the pulse." >> let's talk about what is happening in greece. one down, two to go. greece's parliament holds its second vote next week and the prime minister still has work to do to get enough votes for his nominee. our next guess says that regardless of the outcome greece is in dire need of nvestment. good morning to you. thank you for taking the time to g with us today. how damaging for the greek economy is the instability surrounding this presidential vote, do you think? >> well, all this procedure should not be relevant at all with the function of the economy because it is a

completely domestic issue on how to elect a president. but i think that both the government and the opposition tried the wrong sheet. the government tried to use the presidential election in order to obtain a victory over the opposition. and the opposition in order to make the government to have a the in this way towards implication of economic policy. so i think that in my view this procedure should have ended without too much political importantlyization. now, of course, it is too late for that. and every logical person in greece hopes that at least this will end effectively by electing a president and then allowing the domestic procedure to follow its usual course which means the government complete reforms to complete

fiscal correction which is undertaken and the opposition to wait for the elections to come and then present its program to be tested by the greek people. >> minister, that's all well and good but we're in a situation where you don't need any destabilization for the greek economy. and as you say we've ended up in a situation where this has become very political very quickly. and it is having an influence on the outside world because people are worried they're going to end up with general elections next year. and you've seen what happened to the greek stock market as a result of this. it is having an impact on stock valuations. and what we're hearing it is having an impact on people's desire to invest in the greek economy. how big a miscalculation was it? >> well, i think that sometimes there's plenty of misdirection on the influx of which -- i

believe that all the main political parties in greece believe that greece has to stay in the euro zone. so there is not going to happen any fundamental threat in the position of greece in the european union and the euro zone. i think that sometimes the markets tend to overspeculate things but they have he ability to take -- take place. the economy is just recovering from a very, very long recession. of course the problem now is that it has to take the right turn. and the right turn should be hat greece needs a bit more re forms to complete but also needs some jobs started in

growth. otherwise employment cannot continue at such high levels as it is now. so i think that -- >> let me jump in because you're saying that the markets sorry let me jump in because you say that the markets tend to overreact but the markets have toppled governments in the past. because if the market is not sure what's going on in the market or they're fearful, then the worst can happen to bond yields. at the moment we're sitting in london and in london financial markets don't really know how to play greece. a lot of people are fearful. they're concerned about turmoil, about prolonged political instability and the potential crisis. so what message that you give -- that you would give to the markets but that is believeable, that is credible, coming from greece? >> well, i believe that the worst case already happened to greece. with 27% contraction over the last 5 years, it's very difficult to imagine that something more siver could happen on the economy.

so i think that markets metimes -- the greek politics. i believe that it would take into account that the main political fortunes in greece actually insist on keeping greece in the euro zone. everything else is going to be negotiation on how best this course is going to be taken. and i believe that now time has come not to talk about the problems any further at the same frequency but we at last need to start talking about investment, job creation, and ending this horrendous recession that has hit the country. >> do you think that will happen? do you think that investment, do you think that economic balance that you talk about would happen regardless of who is the prime minister of this country? do you think if he was the prime minister of greece that that would be the scenario that we're looking at?

>> well, i think that in the event as we go to elections they decide who is going to be the prime minister. but my firm belief is that whoever is prime minister is going to try first to keep greece fully into the euro area, second, to make job creation a top priority. this is what our country needs. and the thing that we cannot achieve this unless two conditions are met. the first condition that needs -- greece needs somehow to negotiate agreements to reschedule debt and avoid payments in the years to come. second it has to negotiate some sort of jump start to the economy. we need investments both private investments and public investments in order to start growth again. there is no other way for greece to go ahead and stay in the euro area. >> ok.

we will watch this. thank you very much indeed for your time. we're going to take a breek. we'll see you in a couple of minutes.

>> germany might be known for its cars but can it ever build a reputation for electric cars?

our next guest says germany lacks the infrastructure to do so. thomas, great to have you on the program. the first question that would come to my mind is with prices at -- with the oil price at these levels, do we even focus that much on hybrid car any more? >> well, subjectively maybe not but we all know objectively that the resources that we have are rubbing out in this world and -- running out in this world and it's absolutely time to reorient ourselves for alternative energy uses. >> why is it that germany's particularly not deciding to make this switch? what is it about the germans that you think is actually making them decide that they're going to stick with the good old combugs engine? >> that's really interesting. when you look at germany the renewable energy that is produced here is actually above average from europe but the average german consumer has not yet found the electric vehicle.

niss san is selling the most worldwide over 150,000 so far and doing a good share in germany but overall the vehicles sold are small. we have no government support in any way shape or form that is matching, for example, norway, who today has 50% more electric vehicles registered than germany. >> you're right to blame this on infrastructure. right? and government spending. does this first of all have to start with big metropolises? you were mentioning norway. when you look at cities around europe which ones are coming up front? >> i have to defend a little bit the german government. it's not only infrastructure. it's also in the german consumer's mind he is not really ready to accept electric vehicles yet because he doesn't know the benefits. it's really a joint effort that's needed from journalists, auto makers, and communities not only government and cities to advertise the advantages of

ev. when you look around europe, there are places like paris and london who are far ahead. >> just back to the original point. how hard is it going to be? journalists and politicians and et cetera probably are broadly on board with the idea that at some point we're going to have to make a switch. how much of a head wind do you face if suddenly it costs significantly less to fill up your tank with petro and therefore the economics of running an electric car change quite dramatically? >> it's actually not that difficult if you have a concerted action. when you look around for a limited time some clear advantages for electric vehicles, for example, support driving on fast lines and so forth would help a lot. it is not true that electric vehicles are more expensive in general. depending on your driving profile, if you drive significant distanses but

regularly to work and back, already a an electric vehicle can already be more efficient than a gas or diesel vehicle of the same size. >> the car sector is so exciting at the moment. in ten years are you going to be selling more driverless cars than hybrid cars? >> the one does not rule out the other. nisssan is actually quite ahead regarding driverless vehicles. and we have made a clear statement that in 2020 we want to have some driverless vehicles out. we think it is a trend that is going parallel to alternative energy vehicles. >> one very quick question. que. a lot of companies are having a problem in russia right now. how big a problem? >> nisssan is manufacturing in russia and of course we're looking at this very, very closely and indeed we do see that for consumers as well as for a manufacturer the current situation is putting some real stress on established distribution system.

>> ok. great pleasure. thank you very much for taking the time. scombroining us from nisssan. we'll take a break. see you in a moment.

>> hitting the brakes. jem, audi and jaguar are suspending car sales in russia. ranks.king francois hollande. >> and another warning. good morning. a very warm welcome to those just waking up in the united states. >> this is "the pulse". >> now, air france has once again cut its 2014 targets and

is once again planning cost cuts. let's get the details. what do we need to know? this is becoming a little bit reptive. >> it does seem to becoming a bit of a trend. third profit warning this year. add up all of the downgrades and you get close to 1 billion euros not good news from air france. the points that they made yesterday when they released this were similar to what we've heard already. weakness on some of their long haul routes. they're seeing additional costs related to the strikes. they also raised a small pension related cost. and then they said some of the weakening or softening of jet fuel prices is not coming through yet. so all of those issues and that led to another 200 million euro downgrade. >> at the same time they've also announced cost-cutting programs. >> so the main thing that they raise is actually pushing back some of their deliveries for the triple 7's. so 2016 they're going to push

that back. it comes at a time when, as i said, jet fuel prices are dropping so it's a little bit less important for the airline to have a more efficient aircraft. the ceo was saying he wasn't giving much guidance on jet fuel on whether that's going to kick in and be a positive thing going forward. last week said the lowering of jet fuel prices is going to be beneficial for the industry as a whole. we'll have to see if that helps perk things up next year. he's been the ceo of the business but he's not done yet. >> he's not done yet. seems he wants to come back. he made an aufert on the 14th of december. the board took two days to think about it and sent it back. so it obviously wasn't enough for them. there are a few different reasons why he might be making

this offer right now. the ceo of aer lingus is poised to go they have not yet appointed a new ceo. ryan air is getting pressure to sell down their stake. and then the pension issue which is overshadowed aer lingus shares is getting closer to being resolved. so all those things coming together and you think that maybe he just took a look at it and decided why not take a punt and see if they bite? he's not the only potential interested bidder for the airline you might see the likes others. and virgin or >> what he wants he usually tries to get. so is he going to go after it again? >> it does seem likely. he's obviously sort of staked sort of made it obvious that he is interested. it's something that he has talked about for a while. he place as lot of value on their slots. i mean, the slots at heathrow that they have, they have 23 slots worth upward of 2350

million you're ost. more than that basically. significantly valuable slot. and he talked a lot about the connection between dublin and london one of the most valuable business connections in the world. but then muller has done an excellent job of developing aer lingus as a long haul airline. dublin is now one of the biggest trance thrick hubs in europe. so that's something that he is obviously seeing some of these things coming through. >> maybe there's another option there. just very quickly. this morning trading just north of two euros. michael's got it on his books at what price? that. 2 euros and 45 cents is the average price. but they've written it down to almost 55 cents. so. >> so there's a 150 upside potentially on to the balance sheet of ryan air if he were to make that transaction. >> you have to wonder. i think the language and things

they've said, michael said regularly if anyone wants to buy it we're welling sellers. and he's brought up the issue like, eat had couldn't necessarily take more than a 49 stake. so he suggested no one's i want rested. that's not why i'm not selling. but he's getting pressure. he's got other things on his agenda. he's expanding ryan air massively. do they need aer lingus any more? is it becoming a pain? maybe it's time to write it off and move on to his many other ambitions. >> thanks very much. now from planes to cars and a time out from russia. some of the world's largest car makers are responding to the ruble's collapse by pulling out of the country. hans nick ols is in berlin. who is leaving and who is stay sng >> some companies are leaving altogether without giving a date when they're going to return. let's put general motors in that basket. some companies are suspending

pricing and therefore sales a little bit. let's put audi in that basket. bmw are saying they're moving inventory the china. so it's really across the board we see different reactions because so difficult to price your automobiles in rubles with the currency fluctuation that we've had. that's what gm said. here's the issue. and when you look at the numbers of sales and 2.2 million units in russia it's the second biggest market in europe. they're down some 70% of the year. take a look at individual brands. 14% from volkswagon. this is month on month. bmw down 24%. audi 23%. pugeo. almost 40%. the only company that allows us to put a number on this is bmw. they denominate how many of their assets are held in rubles. if there's a 50% decrease in the fourth quarter they will lose some 100 to 150 million euros in sales. that's according in profit to

one estimate. so clearly the bottom line is going to be affected in all the auto companies are scrambling on how they react and how they price. >> most cars not a great store of value. they tend to depreciate rather than appreciate. there are some that are the exception to the rule e though. >> we started looking at this a couple weeks ago because we noticed a trend. and the super luxury the ultra luxury cars have actually gone up. so you've seen porsche sales increase by 55%. the previous month 20s. lexus up 63% from 25% in october. mercedes even which of course has the most connection between germany and russia remember the economy minister just sat down with the ceo of mercedes last month in stuttgart they're up slightly. so at least in the super luxury model you do see what's happening in russia people are looking to park their assets in

to hard vehicles. you captain drive those away. -- can't drive those away. >> thanks very much indeed. >> now, this is what else is on our radar this friday morning. the bank of japan has mainlted its levels of unprecedented stimulus. the bank said it will boost the moptry base at an annual pace of 80 trillion yen. they expect the japanese economy to continue its economy at a moderate pace. >> the obama administration is weighing a proportional response to the cyber attacks on sony pictures. sony canceled the release of its movie the interview due to threats from hackers. white house spokesman josh ernest refused to say whether the u.s. has concluded that north korea was behind the attack. he said the administration is wary that the intrusion may have been designed to provoke a large-scale u.s. response. >> and u.k. broadcasting regulator has said it is

consulting on its view that limited distribution of the football content may harm competition between pay tv retailers. now, the review will determine whether regulation requiring sky to offer two of its sports channel to other pay tv providers remains an appropriate way to ensure affected competition. of come will outline further steps to be taken. >> still ahead, a standoff over russian sanctions. the ruble leaves the russian economy in freefall, the french president breaks ranks with european learts over the timeline. >> and the money and the music. we'll bring you the sound of 5 million pounds strat various violin live as we discuss the lucrative business of investing in vile lins.

>> welcome back to "the pulse." >> breaking ranks. the french president francois hollande. talking about rolling back sanctions. german chancellor merkel not. >> reading the tea leaves is this a risk? is it too much to talk about this being a risk? >> look, it's interesting and

it might be the sign of a rift. the thing is that the emplet u. decided they were going to wait until at least march to begin discussions about rolling back those sanctions even if president hol ande got what he wanted and there was a roll back the earliest it could happen is july after all when the current sanctions against russia expire. so he's gotten a bit ahead of schedule. but come july we now know that the french seem to be big proponents of rolling back the sanctions. you can understand of course they just kissed good-bye a .5 billion deal where they would have sold two war ships to the russians. two hep copter carriers. the austrians are complaining their banks are getting hit in this. they've got big exposure to russia. even german companieses complaining. basf had to shelve a big deal they intended to do.

but the big difference between president hollande and chancellor merkel the chance lore says we have to stay with the sanctions. >> tell us about the sanctions. >> i don't think anyone at the european union anticipated or to be fair could have anticipated the financial turmoil that russia is in right now and that's something den mak's prime minister is saying. the goal is never to collapse russia's economy. the goal was to punish individuals in the russian president's inner circle to encourage him to change course in ukraine. there's a real fear that this perfect storm we have of the sanctions plus the collapse in the oil price plus the other geopolitical factors affecting the russian market right now the using more pain than e.u. wanted and perhaps turning the russian population against the european union and causing more potential economic

problems for western europe itself. so one thing we're definitely not getting at this meeting is anyone talking about more sanctions right now with the exception of the fact that they did introduce some sanctions against crimea yesterday. but those were rather minor. >> thank you so much indeed. >> now for more on this we're .oined by economist we didn't always agree with our previous guest. is this bad cop bad good cop trying to give the two views to give putin an exit? >> it might be a good cop bad cop approach because it's not completely in line with what used to be the relative positioning of germany and france on this issue. germany seemed to be a little bit cautious on the sanctions. france was to some extent indifferent or at least tried not to play a leading role on

this. it might be good cop-bad cop. the point we like to make is that i understand from a political point of view the focus might be on the sanction bus in terms of the economy financial impact the sanctions are completely second relative to what oil and the underlying situation in russia. so if we get to a lifting sanctions or if it's created a little bit of consistent in the system fine but the underlying weakness will remain there. >> that's going to be for a fairly long period of time. how big a drag is russia going to be in 2015? >> quite a drag. you could argue that a lot of it is already in the data. if you look at german exports to russia which is the best gauge, their exports to russia have already fallen by nearly 30%. interestingly 90% of that came before march of 2014. in other words, when the political situation realy

worsened most of the drop had already taken place. today, the share of russia in 2.5%, xports is only used to be 4%. so even if we get to a steeper collapse, a lot of it is already in the data. so it's definitely not good news but a point i would like to make again if it's all about oil the more russian demand falls it probably reflects the fact that oil prices are declining which remains a net positive for the euro zone economy. that's why i would not make a mechanical judgment there because obviously russia is disruptive. something we can see every day, already having an impact on what corporations are doing in russia obvious. but down the line we still have the effect. >> asymmetric. >> in the sense that you have the first disruptive effect on countries that are utterly dependent on oil and have not

built large reserves. don't forget that last year's russia was lower. it's not a big saver. it's a big spender. so when a big spender hits a rock it's obviously a very immediate negative impact on ts supplies. >> even if there's a complete meltdown in russia, at what price can you get a meltdown and ruble even going to 100 without a complete meltdown of oil prices just because it's self-perpetuating? >> that's obviously the risk. and when we made our forecast a few weeks ago what we tried to do was to already incorporate actually a negative geopolitical risk from russia. we're also i think conservative on what's happening on oil prices. so i think that it's already to some extent in the story we're

telling, which is that support from the outside for the euro in 2015-2016 in spite of the appreciation of currency, in spite of declining oil price, remains extremely shaky. our forecast for world demand to the area, 2015, it's only 4.5%. the average in the ten years before the recession was 7%. so in any case we're operating in an environment where the rest of the world is actually not as supportive as it should be. >> interaction between qe and oil prices. how is it going to work next year? are we in for a double stimulus here? 60 from let's call it throughout the year? how do those two interact? >> at the risk of being cynical what we could have is that some relief coming from lower oil 4 ces materializing in q 3-q

-- between q 2 and q 4, sorry. to say this is working. m actually fairly suspicious basically of the real impact of q-e on the euro economy. i think it needs to be done because there is no other option. i don't think it will create such a big boost to domestic. at the same time, we'll have the effect of the currency, the effect of the oil prices materializing into 2015. it will help to argue that what it's doing is actually helping. but i'm here taking a fairly cynical view. the problem with qe in europe is that its transmission channel is very contorted. the main impact for me still transites through the behavior of the banking system which is that if you completely kill off the current trade, if you basically kill this opportunity that banks have to simply store their cash into government bonds you will force them to stop lending.

that's the main transition channel. the problem is we've already seen a very steep decline in yields. it has not yet really triggered the ng in terms of transition. it will be a very contorted transition. >> thank you very much for that. now coming up. >> this is what a 5 million pound strataverius sounds like. it sounds great. doesn't it? a good investment? we're going to find out after the break.

>> welcome back. you're watching "the pulse." angry scotsman. and world leaders. what do they all have in common? i'm going to tell you. they've all been part of the day's work for our award

winning photo team right here at bloomberg photos in 2014. it's been quite a year the team snaps 350 pictures a day. provides 24/7 coverage of the world events that matter. you want to know what the best pictures they took this year look like? heck this out.

>> this could really rival -- all the pictures are amazing but this could rival putin's press conference tomorrow. >> that press conference spectacular i think we win. >> this is better. >> we've got some great thinging coming up. we've already given you a snippet of one thing. it is a 5 million pound strataverius. worth the investment? we're going to find out. sounds fantastic. we're going to take this to break.

♪

>> welcome back to the pulse. live from bloomberg's he had quarters. >> these are the headlines. >> eyeish airline aer lingus has turned down an offer from iag. takeover would have dominated. iag said in the statement that there was no certainty that a further offer would be made. >> french president has suggested it could be possible to scale back sanctions against russia. e comments that an e.u. summit

put him at auds with most of eastern europe which want russia to comply with demands before offering any easing of sanctions. >> natural gas a assets has fallen through. the world's biggest chemical makers said yesterday in a statement that the cancellation will cost the company 324 million euros in current and retro active expenses. speaking in july basf's ceo told us he was certain the deal would go through r. i'm 100% confident because everything is in place but some legal preparations we have to do internally still have to be undertaken. so therefore this is not as previously announced on july 1. basf, ceo, speaking earlier this year. equities beginning to fade a little bit. >> thank you.

i'm looking at stocks high. we are higher but only by a third of 1%. the up here in london still up. some really strong gains not just in europe yesterday. the biggest one-day pop since 2011. but in the united states as well. the biggest rally in some 3 years. we're going to move things son. what do you think i'm looking at? dollar-ruble. let's add a little bit of animation. francois doing this. ripping up the script on russia talking about descaling. scaling back sanctions on that country. thanks the start of a conversation at least. you see dollar-ruble moving lower. that is a stronger ruble. though i look at it on the week. this right here is some serious volatility through the week. we are higher on the week by 3%. but it has been a week and a year. this could be candidate for the

year. this is what i think is shot of the year. because in two week's time. look at this one. this is the one that is going to have real implications as we go into next year. we are down over 50% from the june high. it's going to have implications for oil producers, stimulate some economies, push other economies off a cliff. it is going to crush them. but as we go into next year this is going to shape decisions of policy makers at central banks and businesses as well. >> all right. thank you so much tearing up his script. some would say you're giving maybe the french president too much credit for having a zript in the first place. joining us from new york with a preview what are we looking at today? >> we continue the discussion that john picked up there of yes better markets but -- and there's a lot of but out there. oil fragile. american oil west texas intermediate 54.89 shows you the still fragility in oil.

we'll look at the emerging market ramifications and of course russia. jeffery will join us. looking forward to speaking to him about the thoughts through the weekend and into next week. michael holland will join us from holland and company on u.s. investment of those that went to cash and regret it ever so much in the last 48 hours. in a conversation with nicholas burns, ambassador has a wonderful history across republican and democratic administrations. nick burns not only on russia but nick burns on cuba. >> all right. we're looking forward to the conversation. >> ok. let's get to one of our top stories. we've been discussioning russia's worst crisis in years. at best will produce stagnation for the country. joining us now from washington is the chief economist the

international -- institute of international finance. good morning to you. thank you for getting up so early in d.c. to come and talk to us. so the best case scenario is stagnation for vladmir putin. >> good morning. thank you for having me. yes, that's true. what we have seen recently including this past week is that russia has sort of a perfect storm, a combination of a weak economy, sanctions, and the oil prices external. let me say why the crisis. since president putin took over russia he has been more dependent on oil and gas. the model made the assumption we are going to increase produck, our prices are going to rise. we are going to use this amount to lead and push russia's

weight in the global economy and politically. this didn't work until 2008 and then stopped since. and a couple of reasons. it's not only the oil price but also the fact that investment in russia has been very weak and it has not really picked up. so, one, everything which has been prepared in the soviet time has been explored thanks to better technology. russia has hit the wall. and the second fact is the investment climate. russia is sord of weird that russia has to bepend so much on foreign. but if you look at the data russians until today have a loss. this money was not invested in russia but put abroad. so therefore this climate led to a very weak investment in the very fragile economy. >> so given what you've just said and the picture that you've painted going back 0

years what are the mage -- 30 years what are the major structural reforms needed and would russia have those pushed through for putin or do we need a regime change? >> well, reform didn't start with them because probably most important russia is a heavily centralized and burektra tiesed country. one should look probably number one to reduce the weight of the state. since putin has taken over the role of the state has increased steadily but in -- not only policy but ownership and control of the economy. mass media. just name it. the second thing is the judiciary. russia has probably one of the most strange judiciary systems. the judiciary is directly involved in different economic actions. on the structural front number one is improving the investment climate. that means we just need the role of the government reducing the intervention of the

military security and the judiciary in the economy. and allowing the russian to really blossle, which is not the case because they're basically a subject of repeated corruption pressures from basically anybody. last but not least is corruption. the corruption is actually the fallout of the this. what is really important. all these things cannot happen without major change from the top. changing the basic social, political system in russia. >> in order to try and delay all of those things happening, vladmir putin would like to do a deal with china. the last time we saw kind of a big deal being done between china and moscow was in february 1950, that's going back in the history books a little bit. are we going to see another sort of beijing-moscow alliance that is strong enough to keep putin doing what he is doing right now being created or do you think the chinese are never going to go for that?

>> well, i mean, this is an interesting question. there will be some sort of russia-china if not for something else then because the trade and financial link between both countries are really weak. as they probably should be. i don't think that chinese salvation for russia and there are several things. the size of the economies and the situations. russia actually if it goes for this type of deal probably risks to become something like a supply to china. i don't think this is acceptable in moscow. also the currency situation makes it very difficult to see how this works to the russian benefit. there will be some reproachment but if you look at the numbers it's very clear the trade to the u.n. and u.s. is much more important from any point of view financial, economic, and so forth for china than for russia. so there will be some but this is not the salvation. the point is that russia needs

foreign capital and but most important russia has to reform itself. >> very early in the morning. thanks for getting up to talk to us. the entities of international finance chief economist. >> now coming up, more about the money in the music. let's go back to that strataverius we've been listening to. does this sound like it's worth over 5 million pounds? we're sitting right here and it sounds beautiful. you decide whether it's worth 5 million. we'll discuss that after the break.

>> welcome back to "the pulse" live from london on bloomberg trn v. >> violins worth millions. let's talk about this. the next guest says it's like a forensic science exercise. on restoring and dealing in fine violins. he thinks that handmade violins are superior. >> here to prove this the founder of fine violins. we've had the pleasure of listening to you on the strataverius which is worth around 5 million. it sounds absolutely fantastic. for people who are watching and

love music, but that are not that familiar, the sound must be very different. right? the more expensive just because it's done so differently which is strataverius is right at the top. >> absolutely. the leader in that market of finer sound than you can imagine. but also violins by strataverius are sculpturs that if you look at that it's -- >> just tell us what this is. >> it's made in 1734 when it was he was 09 years old. he was an absolute genius. and at that time people didn't live that long. he became 93. already how many has he made overall? >> maybe more than 1,000 but we have 650 remaining ones. this is a fine example. you can see how that glows. it's like a three dimensional hollow gram that you see on here. when we tried to replicate this we don't know how to do it

today. >> you put that to the camera. it's we can't replicate a lot of things that he was able to do 300 years ago. >> so 3-d printing is not going to do this. >> no. it's not going to do that. >> how do you sell these? they're rarely at auction. they're so rare. do you usually buy for someone specific? what kind of collect snr this is worth 5 million. >> yeah. so unfortunately the violin's already for the last 100 years easily have totally outpaced the ability of a musician to buy it. only the top stars can eventually buy it. which is kind of an exit route sometimes for an investor who buys one, loans it and after ten years the career's kicked off so well that that young star can actually afford to buy it back. that happens quite often. >> what difference does it make in i'm sure you've picked up

lots of violins in your time. talk me through the difference between this one and all of the others you've probably ever handled. >> literally when you put this under your chin it's like magic. it's hard to put into words. it connects with the sound world that is so different to violins of perhaps a lesser quality. and for someone like myself it's a dream to have an instrument like this to play because it opens up your possibility. -- to play as well as you possibly can. and i think also within different concert halls different venues you have the ability to really play with your full being. >> 100%. >> it just changes everything. it's very hard to put into words but it's a feeling. >> what are the collectors like? are there collectors around the world who own them? or is it actually more sparing? is there a collector in the art world?

>> like anything the up and coming collectors and well-established collectors. there are people who have 15, there are foundations who maybe own 25 even. but there are a lot of people who now have two or three and save up to the next one, want to have another one that fits into the right slot because he had different periods, like the early one, the long pattern, the golden, and the late period. so out of each period they can get a fine example, a collectible that maybe had a beautiful provenand was played by a great composer or violinist in the past. and so collectors from all fields. >> as an investment, i think an investment in music is probably enough to be going on with to be honest. but as an investment how do they perform? >> surprisingly well.

>> i'm not that surprised. >> i'm not surprised, either. >> it's a proper asset because we have only 650 in the world. where we're growing and globalized world we're growing culturally as well. so we have the hall of asia which is huge, billions of people added on to our small european background that now love classical music and have it as education in the schools. which means more and more interest is coming out there. and i myself have much more success now in asia. >> right. >> i guess is it rare to actually value them? because they come to the markets so little. would you say it's been a 20, 30% increase in the last ten years? how difficult is it to put numbers on these? >> i would say per year we are trading maybe only 25 to 30 super high end instruments that cost millions apiece. but below that, below let's say

the 1 million pound barrier, between the 1 million pound and 100,000 pounds it's a huge field. and it performs equally well. so it's not only the strataverius that costs for many people too much. you can have in the lower segment the same returns. but the driver in this market is very often not only the percentage. let's say 10, 1% on return. kind of traditional over the last 100 years even throughout the world wars we had record prices achieved. so nothing really affects neither the rulebook situation right now or whatever. nothing affects this trade at all because culture and music is always necessary. people want even in bad times need music even more. and music at the super high level which we know is a creation by humans during the renaissance, the erass of europe, is something we don't

want to lose. >> all right. we need a bit of music. >> we're talking about the boring bit to be honest, the money, how much it's worth. how much this is going to be worth in the future. i guess the beat of it is really listening to it. so let's let lizzie give us a bit more. ♪

>> so as the year draws to a close i've been watching up with some of the europe's corporate movers and shakers. i spoke with three of them about their toughest challenges in 2014. >> i'm always amazed by the strength of the u.s. economy. incredibly strong. productive, creative, innovative. they really focus on getting growth and really something the euro zone is only starting to understand. >> growth with increasing -- >> by funding the economy. >> the growth. they focus on funding the economy. >> i don't want to say you're

wrong but i have a question. >> go for it. you can play my role. >> no. no. you will lose. >> bloomberg will lose the origin. no. no. the question is maybe they have been right in letting lehman going bankrupt. do you believe it was now in hindsight the good move or in the wrong move? >> we'll catch the full conversation tonight on bloomberg. >> i'm not going to the pub. i'm going to stay at bloomberg. so i can watch it at bloomberg. >> ok. let's talk about some of the subjects we've been talking about over the last few days. the sony saga continues. the release of the film has been canceled.

sony is trying to limit the damage while security experts are figuring out exactly how the hack was done. let's bring you up to the latest revelations. >> still trending number one on twitter the interview of course. we've been doing digging into how the hackers did this talking to security companies. it seems that probably the hackers behind this got in probably spent months collecting passwords, mapping the network. but then they could so efficiently go in and wipe out date ave crash the system within 10 minutes. the virus that they used to destroy actually can be found on the black market. you don't have to be that much of a computer geek, you don't have to be that technically sophisticated, so says some of these technology experts that we've been talking to, in particular trend microro is the company we've been speaking to. my osha has been trying to high liggete that yes you can

customize this to specifically embed itself within the sony network but actually it was months of planning, perhaps not that much high level sophistication. >> and the executives are frying to downplay. >> some of the terrible leaks that have come out in some of the e-mails. what was interesting is the cochairwoman, you've got a lot of people to apologize to. she's already met angelina jolie which is probably awkward, producers called her of minimal talent. they've been going to the black community because there's some appalling e-mails leaked trying to laugh about what obama's favorite film might be. she has been meeting with black sil right leaders, particularly those in reverend al sharpton and interesting that was a heated debate but hopefully managing to progress forward so they can stop trying to rebuild some of and trying to rebuild.

>> that's it for the pups. >> fran sin is going to take time off. >> on holiday. >> i will be back. surveillance is up next. we'll see you next year. >> merry christmas everyone and a happy new year. [captioning made possible by bloomberg television]

>> this morning, oil continues in search of a bid that ruble is stronger. the french, the french, i say.

they say enough as maintaining russian sanctions. and it's the watch that ticks on ticking. it. y to survive good morning, everyone. this is "bloomberg surveillance" and we're live from our world headquarters in friday. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] i'm tom keene. brendan greeley and scarlet fu. she's here. she nowled not be here. >> trouper. >> we'll see how long that lasts. >> there's extra honey on the desk. >> you sound like me. >> i do sound like you. >> terrible. >> global stocks resume. asian stocks closed higher. here in the u.s., the s&p 500 headed for its best week in two months the index is coming off its two-day rally in two months. futures did pair their gains but still indicate tha